Virginia tells lies to trick emigrants into thinking they owe Virginia state tax

As if federal citizenship-based taxation wasn’t bad enough, on the recently updated website of the Virginia Department of Taxation, we see a blatant attempt to scare people born in Virginia into paying taxes they don’t owe, by reiterating the falsehood that an American citizen by definition must be domiciled in one of the fifty states — since of course as we all know, no one ever checks out from the Hotel California Greatest Country on Earth™ besides a few rich ingrates fleeing the estate tax:

Virginia residents who travel outside the country, or take up temporary or permanent residence abroad, should be aware of the filing provisions discussed below. If you are a Virginia resident who accepts employment in another country or moves outside the United States for other reasons (including military orders), the fact that you are living abroad does not mean that you are no longer considered a Virginia resident for tax purposes. Unless you have established residency in another state, you will still be considered a domiciliary resident of Virginia, and will be required to file Virginia income tax returns.

A domiciliary resident of Virginia is one whose legal domicile in the technical sense is in Virginia. Unless an individual acquires a legal domicile in another state, he or she is still a Virginia resident. This applies even if the person is residing in another jurisdiction and may have been residing there for a number of years. The fact that a person has been absent from Virginia, whether in the foreign service of the United States or in the exercise of private enterprise, does not in any way cancel out their Virginia citizenship or legal domicile.

3. Domiciliary resident. A “domiciliary resident” is one whose legal domicile is Virginia. Most domiciliary residents actually live in Virginia; however actual presence in the state is not required. Any person who has not moved from the state with the intention of permanently residing outside of Virginia is still a domiciliary resident even though he may be actually living some place else.

A domicile once established continues until the individual moves to a new location with the bona fide intention of making his fixed and permanent home there. A person can have only one domicile. If he has two or more places of abode, his domicile is the one which he regards and uses as his permanent home.

Acquiring citizenship in a foreign country is pretty much a textbook example of intending to make your permanent home outside of Virginia, but don’t expect the Department of TerrorTribute Taxation to want to let anyone know that. In fact, the idea that one can abandon Virginia domicile by moving abroad — not just for purposes of reality but for purposes of tax as well — is borne out by actual rulings of the Tax Commissioner. The best example I can find at short notice is this ruling from 1984, in which a taxpayer who left Virginia, had no income in Virginia, and had no ties to Virginia besides a house that he rented out was ruled to have redomiciled to the United Kingdom where, you know, he actually lived.

The determination of bona fide intention to change one’s domicile is a factual matter which must be resolved on an individual case basis. In making this determination consideration is given to a number of factors, including, but not limited to the following: sites of real and tangible property, location of savings and checking accounts, motor vehicle registration and licensing, motor vehicle operator’s license, voter registration, membership in clubs and civic groups, place of business, profession or employment, charitable contributions, location of schools attended by children, length of time of residence, place of birth and marriage, residence of family, reason for abandoning or acquiring domicile, and, in the case of a minor or married person, domicile of parents, husband, or wife and/or children. No single factor is dispositive in determining domicile; rather the factors are examined collectively to determine if the intent to acquire or abandon Virginia domicile exists. A simple declaration of intent to abandon domicile, or physical presence elsewhere is insufficient to abrogate Virginia domicile.

The idea that a government would take “place of birth” into account as an element of determining domicile shows desperation, but note even then that it’s only one of more than a dozen factors considered. Voter registration in Virginia — the only means by which a former Virginian residing overseas can exercise the pathetically limited franchise for which U.S. Persons abroad pay so dearly — is also no more than one factor.

Just keep in mind: once you’re out of Virginia, you’re much better off never going back. In one case in 1999, an Army guy who was stationed abroad for 12 years, married a German woman, had three German citizen children with her, and had no actually ties to Virginia was found to have been a “Virginia domiciliary resident” for all twelve of those years because after all he went through, he was caught up in the Army’s reduction in force layoffs, became unemployed, and chose to come to Virginia again to pursue civilian employment.

Even more bizarre is this case from 2001, in which a (possibly hypothetical?) minor who had never spent a day in Virginia and who worked overseas as a civilian employee at a U.S. Army base was determined to be a Virginia domiciliary because his parents were domiciled in Virginia when he turned 18.

17 thoughts on “Virginia tells lies to trick emigrants into thinking they owe Virginia state tax”

The guy that worked on an Army base may have filed US federal taxes only and not been subject to German tax? In this case I can understand somewhat Virginia’s approach, although the guy obviously never used any infrastructure there.

If he filed US taxes and excluded foreign income taxed in Germany (FEIE) then perhaps his adjusted taxable income was zero, hence zero for the state tax return as well? This is how it would have worked in many different states.

There is nothing in any of the references cited by Eric to support the notion that Virginia refuses to accept an abandonment of Virginia domicile for that of a foreign country as an effective abandonment of Virginia domicile and, hence, of Virginia’s right to impose its income taxes on that basis.

On the contrary, it is implicit and/or explicit in all the decisions to which Eric provides links that Virginia does indeed recognize a change of domicile to a foreign country but – for obvious and well-founded reasons – will closely scrutinize the validity of a change of domicile to a foreign country.

In each case where Virginia found that Virginia domicile continued, the facts – in particular, the actual conduct of the taxpayer as opposed to his avowed “intent” – as fairly interpreted did not support an actual change of domicile.

So there is no reason for anyone at IBS to get their panties in a wad over Virginia’s tax policy.

If, however, you DO need some reason to get your dudgeon elevated, I would invite you to take a look at Alabama. AL regards an AL domiciliary who leaves AL for a foreign country yet who retains the intent to return to the UNITED STATES, i.e. one of the 50 states or the District of Columbia as a person whose abandonment of AL domicile and/or acquisition of a foreign domicile is incomplete. In the absence of any clear preference as to which of the 50+ states the AL nonresident intends to return, AL narcissitically assumes that the nonresident will choose to return to the “Heart of Dixie” when his foreign adventure ends.

But even AL does not exclude the possibility of effective (i.e. genuine) adoption of a foreign country as a new domicile.

*The soldiers and Sailors Relief Act provided that military personnel were considered residents of the that from which they enlisted or were drafted, unless they took positive steps to establish residence where they were stationed

Some of these steps were registering to vote, requesting homestead exemption on local property taxes or gettng a driving permit ( for the record the act extended your home state driving permit indefinitely as long as you were on active duty)

This happened to me while I was in the US military. There is a form that service members fill out where they elect the state of residence. I changed my state of residency to Texas, and guess what? I received a collection notice a few years later. I just wrote a letter explaining how I changed my state of residency, and they cancelled the collection notice. It really wasn’t a big hassle <back then – 2001, I think>. The last US state I lived in *WAS* Texas so I haven’t had to deal with any more state-level collection notices since. But I’m still looking forward to renouncing here soon. The most important thing is simplifying my life and only paying state and federal taxes where I live.

The bad thing (for the whole world, really), is that most countries look to the US and see a very correct and successful country. Whatever the US does is OK in their book. I really wouldn’t be surprised if we see more of this “US-like” taxation going on with other countries, where more and more countries make it harder to be excluded from the tax rolls. “Have a post box?””You have ties to this country!” sort of thing.

@geeez, I agree, France is even looking towards citizenship-based taxation, in response to French actor Gerard Depardieu moving to Belgium. They demonize him, just like the US demonized Edwardo Savarin. They even threw the idea of removing his citizenship.

The politicians, instead of questioning the controversial 75% income tax law for people making over 1 million euros, want to vote more laws to make it more difficult for people to leave. They feel like they have to do something. Since they can’t remove his citizenship, which would render him stateless, they think the US model sounds pretty appealing.

The proposition of socialist senator Yann Galut: “Adopt a law, on the model of what is done in the US, taxing people on the difference of what they’re paying in their country of residence and what they would pay in France. If the people refuse to pay, they would revoke their citizenship”.

Clearly, the second part has no chance of passing, but I am afraid of the first proposition.

They continue:

“Today, with Depardieu’s story, the debate is back, and the left is required to address it. Bruno Le Rouz told iTele, that he would put in place a group of socialist elects who will make “propositions” at the beginning of 2013. The problem is serious. Elected people want to address it”.

@Christophe- I agree that it is depressing. His statement that the U.S. only taxes the “difference” shows just how ignorant of U.S. citizenship based taxation are those who would advocate its emulation by other countries. They have no understanding of how the “difference” is even arrived at nor do they realize that citizenship based taxation is based on several fallacies. One of which is the idea of tax equivalency between sovereign states.

It is because of ignorance like this on the part of world leaders that so many of them are eager to jump onto the FATCA IGA’s. None of them are willing to acknowledge the IGA’s assymetrical balance of power that favors the U.S. Nor do they want to recognize that emigration is a legitimate part of a country’s political process.

As the article explains in the end, France cannot effectively apply taxation based on citizenship in any country with which it has a tax treaty, unless the treaty is renegotiated, which is very hard to do. Within the EU it is currently impossible. Therefore, if France decides to tax based on citizenship, it would probably only affect French citizens living in tax havens. And France already has a treaty with Monaco that allows France to tax its citizens in Monaco as residents of France, so the effect would really be minimal. France also cannot remove citizenship unilaterally due to treaties against statelessness. So if people leave to avoid paying the 75% tax, too bad, there is nothing France can do. This time the government will have to accept that it cannot control everything.

As I wrote before, I don’t think citizenship-based taxation will be adopted by any other country. It’s the US that will eventually abolish the last instance of this absurd anachronism.

Shadow, the US has set a really bad precedent of “bending” or just not abiding by international laws. Iraq anyone? If there is ANY possible link to the US, even just a financial transaction in US dollars, they fine at will, put a red notice on Interpol, etc.. I’m not condoning criminal activity, but the US does not respect international boundaries.

Many other countries are looking at this example and saying “If they can do it, why can’t we!!?”

@geeez, From what I understand, Brazil confiscated his passport to prevent him from leaving the country, it didn’t revoke his citizenship.

I agree that ultimately governments can do whatever they want, but not so easily. There are constitutions, laws, treaties and courts, where a person can seek correction of government injustice. Also, the ability of countries to enforce their laws abroad is dependent on other countries’ cooperation. But if all branches of government agree, and other countries agree too, then yes, governments can do anything that is physically possible, regardless if it is legal or morally correct.

Shadow, did you ever get that meeting arranged with Sen. Schumer? I hope you’re right about the US obeying international laws, but here is another one. Keep in mind that this was a major media circus event here. I”m not putting this here to try to justify my hypothesis that France will strip some Frenchmen of citizenship. It is merely an example of relations with Stateless people, as with the previous example of the Dutchman. (please see my key below the URL. If not, this translation will look like a Chinese-produced English User Manual.)

Back to the issue: Firstly I noticed something strange with this. He tried to get into Portugal. The Portuguese put him on a flight to Brazil (WTF!). Then he was jailed in Brazil (WTF!). This poor guy went through a lot. When both Burundi and South Africa refused to accept him, they finally accepted to let him stay here. Keep in mind that Brazil has signed every treaty possible on Statelessness. And why did the Portuguese do what they did? I’m really glad that the Brazilian judge honored the Treaties and let him stay. It’s just disappointed that it took a federally appointed judge to get this done. I don’t see this as racist, but more of a case of xenaphobia.

I see this as a “coming of age” episode for Brazil. Before 1994, a lot of people wanted to leave. Now, everything is good and there is a lot of illegal immigration.

@geeez, I’m still a little afraid hesitant to meet with Schumer, and I don’t think it would be productive. I’m waiting to see how things will develop with the assistants I already met.

Thanks for the link to the story. The judge’s argument is interesting, he said that Brazil had to accept the African man because of “human dignity”, since otherwise he would be considered a “thing”. It looks like the judge saw reality instead of being focused in meaningless bureaucracy. Nice.

Depardieu, who turns 64 this month, said he has worked since the age of 14, first as a printer, and that in last 45 years he has paid (EURO)145 million ($190 million) in taxes.

“I hand over my passport to you and my social security card, which I have never used,” the letter said, referring to Prime Minister Jean-Marc Ayrault.

Last week, Ayrault called Depardieu “pathetic” and “unpatriotic” for the actor’s decision to move to Nechin, a Belgian village barely a mile (1.6 kilometers) across the border from Lille in northern France. Nechin has drawn other high-earning French residents.

The letter drew quick reaction but little sympathy.

Culture Minister Aurelie Filippetti said she was “scandalized” by Depardieu’s decision to turn in his passport. “French citizenship, it’s an honor,” she said on BFM-TV. “It is rights and duties, too, among them to be able to pay taxes.”

President Francois Hollande plans to levy a 75 percent tax on revenue over (EURO)1 million to reduce France’s budget deficit and debt, and Filippetti said, “Gerard Depardieu is deserting the battle in the war against the crisis.”

…

It’s unclear whether Depardieu realizes his proclamation may in the end just be a symbolic gesture because it’s hard to stop being a French citizen. The Civil Code says one must have another nationality in order to give up French citizenship because it is forbidden to be stateless.

Gérard Depardieu only has to move to Belgium to stop paying French taxes. French citizenship is irrelevant in this case, and it seems that he turned in his passport as a form of protest, but he did not renounce his French citizenship. He can live in Belgium without a French passport, but not without French (or other EU) citizenship or a residency permit.

Contrary to what some are suggesting, this incident will not lead France to implement citizenship-based taxation. France already applies it to its citizens in Monaco, but it is impossible to apply it inside the EU or in any other country with which France has a tax treaty (currently more than 110 countries). If anything, this incident might lead France to abandon its 75% tax rate. Sweden decided to abolish and reduce various taxes on corporations and individuals in part because IKEA left Sweden as a protest against high taxes.

When I left California in 1987 to go to Frankfurt with the USACOE I was well aware that California had a bad reputation for finding and taxing expats. That is why I closed my bank accounts there and NEVER voted there (this was why I was effectively disenfranchised). I figured that some day I would return to CA and I didn’t want them to claim that I never really left and always intended to return.

Virginia obviously has loads of residents working in the military (contractors included) stationed overses as. Often these guys have families at home in VA, so there are reasons why they would behave this way.

These military personnel, including contractors, are covered by the SOFA (status of forces agreements) agreements with whatever the hosting country is. Normally the SOFA agreements exempt these guys from taxation in the host country, that is why the FEIE doesn’t apply to military personnel.

When I was working in Frankfurt, the wife of a COE colleague of mine worked for Merchants bank on the PX. Since she was working as an American for a US military contractor she was covered by SOFA and exempt from German taxation. As a non-military US person working overseas her income was exempt from US taxation up to the FEIE limit. She paid no income taxes.

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